Wealth Management and Financial Anxiety

A Journey

Growing up my family didn’t have the most stable economic situation, and now adult me has intense financial anxiety. I’m always planning for the worst case scenario. What if I loose my job tomorrow? What if I can’t pay my mortgage? What if we hit another recession? Questions like these fill my head day after day and I check my bank balances and investment accounts at least 3x a day just to make sure I didn’t somehow lose a bunch of money due to some freak incident. The anxiety is real but through therapy and learning about my finances, my financial anxiety is a little more manageable now.

The thing with trying to learn about finances and wealth management when you have financial anxiety, is that all the advice around financial planning is about growing your wealth and investment strategies. But that means risk and risk is scary. While my wealth management strategy might not be the best in terms of growing wealth it is a stepping stone, and has helped me ease my anxiety while also not letting my money just sit in a savings account. For those on the same boat as me I’ve shared my learnings and journey below.

My Wealth Management Journey

Financial Planning: The first step I took on my wealth management journey was to see a financial advisor. This was actually very helpful, I learned about the 5 pillars of financial planning. I also learned that right now I don’t trust other people to manage my money and that I needed to learn these things by myself. I did come out of that meeting with a clearer plan of how I was going to save my money though. My main focuses were on budgeting, saving for an emergency fund, using an RRSP to increase my tax refunds, paying off my loans, life insurance, and using a TFSA to save and invest any extra money.

Emergency Fund: The general rule of thumb is to save enough money for 3–4 months of your monthly expenses. I tend to add a lot of buffer room to my budget to ensure I don’t overspend so I saved a little more than actually needed. But hey, the more the merrier! I put these savings into a TFSA. This isn’t necessarily the best strategy, but I like splitting up my money in various different accounts. Doing so eases my anxiety since the chances of me losing my money in all my accounts is probably lower than if it were all in one account. So, I just in case, put around one month of my expenses into a regular savings account that I don’t touch.

RRSP: There are different types of RRSP accounts for different risk levels. I initially started a daily high-interest savings RRSP account which is low risk but you don’t make that much interest and its pretty akin to a regular savings account but with the benefits of contributing to an RRSP. This was my safe choice and it didn’t affect my anxiety too much and honestly anything is better than nothing. Now that I’m a little more comfortable with my finances and don’t get as anxious I have moved to the Wealth Simple RRSP, where I’m getting a higher return.

Benefits:

• If you have a high income, you can use your contributions to reduce your income and get a greater tax refund come tax season.
• You can withdraw up to $35,000 for your downpayment under the Home Buyers Plan and you have 15 years to repay this amount. Using this is beneficial because you have access to the funds you contributed and can withdraw them without having to pay taxes on them, but by contributing you’re also getting a bigger tax refund that you can also put towards your downpayment.

TFSA: Much like the RRSP accounts there are different accounts for different risk levels. You can also have as many TFSA accounts as you want as long as you don’t go over your yearly contribution room. So based off my financial goals I started a long and short term TFSA. Initially started a high interest TFSA with my bank but moved to Wealth Simple.

Life Insurance: There are two main types of life insurance policies I learned about, universal life, and term. There are probably others but these were what I was interested in. Life insurance is something that can and should be changed and updated based on different stages of your life. I currently have both a term and universal life insurance. I opted for a combination of both because I wanted to have enough life insurance to cover my mortgage amount and funeral costs, etc. but I also wanted to use my life insurance to grow my money and I wanted to do all this for a lower monthly payment.

• Universal Life: You only need to pay for certain time period, usually 20 years. The monthly payments will be higher than term, but there is a guaranteed death benefit and you build equity on your payments which can be used as a living benefit or as long term savings that will get added to your death benefit if unused.
• Term: You set a term ie/ 30 years and you pay monthly for the whole term. If the term ends before you die you have to renew the policy or start a new term policy. Usually cheaper than universal life, but you’re not building equity.